U.S. Supreme Court Hears Oral Arguments In CAFA Evidence Appeal

WASHINGTON, D.C. — (Mealey’s) The plain language of 28 U.S. Code Section 1446(a) requires only “a short and plain statement of the grounds for removal,” not evidence, the attorney representing Dart Cherokee Basin Operating Co. LLC and Cherokee Basin Pipeline LLC argued Oct. 7 before the U.S. Supreme Court (Dart Cherokee Basin Operating Company, LLC, et al. v. Brandon W. Owens, et al., No. 13-719, U.S. Sup.). 

(Oral arguments transcript available.  Document #43-141017-002T.

However, Rex A. Sharp of Gunderson Sharp in Prairie Village, Kan., arguing on behalf of the respondent Brandon Owens, told the Supreme Court justices that they had no jurisdiction over the appeal because the 10th Circuit U.S. Court of Appeals did not accept the remand appeal in the case. 

Class Complaint

Brandon Owens filed a class action petition in October 2012 in the Wilson County, Kan., District Court on behalf of natural gas royalty owners who allege that they were underpaid by Dart Cherokee for working-interest Kansas wells between Jan. 1, 2002, and the date of class notice. 

Owens seeks compensatory damages, costs and other relief under theories of breach of contract and unjust enrichment. 

Dart Cherokee and Cherokee Basin Pipeline filed notice of removal on Dec. 5, 2012, to the U.S. District Court for the District of Kansas (Brandon W. Owens, et al. v. Dart Cherokee Basin Operating Co., et al., No. 12-4157, D. Kan.) [enhanced opinion available to subscribers] pursuant to the Class Action Fairness Act (CAFA).  The defendants claimed that the amount in controversy is more than $8.2 million. 

The plaintiffs moved to remand on Dec. 19, 2012. 

Before the filing of responses to the motion to remand, the case was stayed pending mediation between the parties.  Mediation held April 4, 2013, was unsuccessful, and the parties were ordered to resume briefing on the motion to remand. 

Judge Julie A. Robinson granted the motion to remand on May 21.  The defendants failed to establish that the amount in controversy meets the jurisdictional threshold, according to Judge Robinson.  

“Although Defendants state in the Notice of Removal that they have ‘undertaken to quantify the amount of additional royalties that would be owed,’ Defendants fail to incorporate any evidence supporting this calculation in the Notice of Removal, such as an economic analysis of the amount in controversy or settlement estimates.  Accordingly, in the absence of such evidence, the general and conclusory allegations of the Petition and Notice of Removal do not establish by a preponderance of the evidence that the amount in controversy exceeds $5 million.” 

10th Circuit

The defendants petitioned the 10th Circuit U.S. Court of Appeals for leave to appeal.  Judges Carlos F. Lucero, Terrence L. O’Brien and Jerome A. Holmes denied the petition on June 20 without oral arguments. 

The defendants moved July 5 for rehearing en banc.  Judges Paul J. Kelly Jr., Lucero, Harris L. Hartz, Timothy M. Tymkovich, Holmes, Scott M. Matheson Jr., Robert E. Bacharach and Gregory A. Phillips considered the petition.  Judges Mary Beck Briscoe and Neil M. Gorsuch recused and did not participate in the en banc review.  Because the votes for rehearing were evenly divided, the petition was denied Sept. 17. 

Judge Hartz filed a dissent with reasons.  “This court owes a duty to the bench and bar to provide guidance regarding the procedural requirements of the Class Action Fairness Act of 2005 (CAFA),” Judge Hartz opined. 

“The district court’s decision, although not an unreasonable interpretation of language in some of this court’s opinions, is contrary to fundamental principles regarding the purpose and functions of pleadings in federal court and to Congress’s apparent understanding when it recently codified the procedure by which a removing party can establish the amount in controversy.  It imposes an evidentiary burden on the notice of removal that is foreign to federal-court practice and, to my knowledge, has never been imposed by a federal appellate court (Owens does not cite any such case).” 

“The Supreme Court has not imposed special burdens at the pleading stage with respect to jurisdictional issues,” Judge Hartz opined. 

Judges Kelly, Tymkovich and Phillips joined in the dissent. 

Judges Lucero, O’Brien and Holmes issued an order on Sept. 30 denying an order by the defendants to stay the mandate of the court pending appeal. 

The defendants filed a petition for a writ of certiorari on Dec. 13 in the U.S. Supreme Court.  The U.S. Chamber of Commerce filed an amicus curiae brief in support of the petition.  The petition was initially distributed for consideration at the March 28 conference.  It was relisted March 31 for the April 4 conference.  The petition was granted April 7. 

Review Permitted

Countering Sharp’s argument, Nowell D. Berreth of Alston & Bird in Atlanta told the Supreme Court that it has jurisdiction over the 10th Circuit’s decision.  

“[T]hey’re not allowed to insulate their decisions from review simply by . . . not explaining them, especially in a situation like this involving the unusual situation and involving a circuit that . . . is wayward, a circuit that is not applying the plain language of Section 1446(a),” he argued. 

Berreth, Brian D. Boone and Jonathan D. Parente of Alston & Bird; Matthew J. Salzman and Molly E. Walsh of Stinson Leonard Street in Kansas City, Mo.; and David E. Bengtson and Jordan E. Kieffer of Stinson Leonard Street in Wichita, Kan., represent the petitioners.

 Sharp and Barbara C. Frankland of Gunderson Sharp in Prairie Village, Kan., David E. Sharp of Gunderson Sharp in Houston, John F. Edgar of Edgar Law Firm in Kansas City, Mo., and Grady Young of Coffeyville, Kan., represent the respondent. 

Kate C. Todd and Tyler R. Green of National Chamber Litigation Center Inc. and John H. Beisner, Jessica D. Miller and Geoffrey M. Wyatt of Skadden, Arps, Slate, Meagher & Flom, all in Washington, filed the amicus brief on behalf of The Chamber of Commerce of the United States of America, The Retail Litigation Center Inc., National Federation of Independent Business and Business Roundtable. 

Scott L. Nelson of Public Citizen Litigation Group in Washington filed an amicus brief on behalf of Public Citizen Inc. 

J. Michael Weston of DRI—The Voice of the Defense Bar in Chicago, Scott B. Smith of Bradley Arant Boult Cummings in Huntsville, Ala., and Edmund S. Sauer of Bradley Arant Boult Cummings in Nashville, Tenn., filed an amicus brief on behalf of DRI—The Voice of the Defense Bar. 

Mary-Christine Sungaila and Jenny Hua of Snell & Wilmer in Costa Mesa, Calif., and Richard A. Samp and Cory L. Andrews of Washington Legal Foundation in Washington filed an amicus brief on behalf of Washington Legal Foundation, International Association of Defense Counsel and Federation of Defense & Corporate Counsel. 

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